Summary of my latest recommendation

Two companies which investors should pay attention to are:

a) Astro All Asia Network

b) Mah Sing Group

The details are posted in this blog

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Another Value Recommendation

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Most of you have made money from my recommendations (Please view my older posts in new blog to see them yourself).

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Value Buy Recommendation

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for this recommendation.

Taking The Bull By The Horns

Are you trying to invest on your own?

Many retail investors are investing by themselves and try various strategies to maximise their return / beat the market.

Some investors like to analyse and pick stocks. Others attempt to choose from a list of unit trusts.

Retail investors think that their own intelligence & skills are above average. 

Logically, it’s impossible for us to outperform the market when information about a particular company is know by the public.Both buyers and sellers know the same information can’t make money from each other.

It’s impossible for investors to beat the market by investing on their own. It would be  alright to think that for each person who beat the market, there must be some investors who are underperforming the market.

Example, let’s say Bursa Malaysia has 100 investors only and the sum of all money invested is RM 1 mil. In order for you to outperform the market, someone must be underperforming by an equal amount.

But what is the probability of success for a retail investor to beat a well organised investment fund?

You are not competing with your neighbour only but actually the whole world including mutual funds,Government linked funds,foreign funds,hedge funds and others.To make some money out of these big funds, you might need an I.Q similar to Albert Einstein, or more.

The truth is,you can’t make money by investing alone and trying to beat the returns offered by big funds.Big funds have accessed to SENSITIVE INFORMATION through their BUSINESS NETWORK. Any information that you and I know have already been priced into the share price. 

Just try to visit Bursa Malaysia in KL / nearest brokerage office. You’ll see a lot of retired senior folks acting like ”Mr. Know It All”.

I really pity them because they are “gambling” away their hard earned money which is supposed to be their retirement fund.They don’t really know what they’re doing. Mass Media are also responsible for this because they are REPORTING whatever stuffs FEEDED to them WITHOUT ANALYSING any information and come out with at least TWO DIFFERENT VIEWS.Well,that’s why their occupation is named “REPORTERS” not “ANALYSTS”.

But most analysts are also “pressured” to find ways to MASK the truth with flowerly WORDS in their reports. Try to read these reports here and tell me whether they help you to make a better investment decision.Or Are these reports trying to MISLED YOU?You really need to read these colourful reports with your BRAINS WIDE OPEN, not EYES ONLY.

After obtaining CFA and working with a famous investment bank for years, I felt indebted to the public because some of the reports which have been published by me (with the directive from CEO) may had caused you/parents/uncles/aunts lost huge sweat money in Bursa Malaysia. I felt bad but I still have to bring back food on for my family.Therefore, I created this blog to do some good KARMA.In this blog,I will recommend companies which I have ”inside” information but it can’t be so obvious because I still want to keep my CFA license.

Please browse my previous recommendations and you’ll find that most of my recommendations make money if you still holding them until today (Buy Mah Sing Group, ahem)

Actually, what I’m trying to tell is almost two-thirds of your competitors is made up of mutual fund managers, pension funds, insurance companies, trusts/foundations, and banks. So, do you want to try to beat the market like Warren Buffet? Do you think you have the INFORMATION to outperform the teams of full-time professionals? These teams are well-funded and have well-staffed research departments. If you’re confident that you can beat them, then you’re probably trying to commit financial suicide

But please go ahead and try because you don’t have to take whatever I’m feeding you right now.

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Bear Market Rally Is Ending !!!

To gauge whether this is a bear market rally,let’s recollect some of the comment given by the pros:

 

 

George Soros

“It’s a bear-market rally because we have not yet turned the economy around,”. “This isn’t a financial crisis like all the other financial crises that we have experienced in our lifetime.”

 

 

Warren Buffet

“ Yeah, it would be too soon. We are not reaching the end. At some point, we’re going to reach the end and I don’t know when that will be, but I know whatever the day is, May 4, in terms of the figures we’re getting out of all our businesses. The American economy is very slow and at the moment and, still getting slower. But that will turn and I can’t predict when. I hope it’s very soon. ”

 

Wilbur Ross, Chairman and CEO, WL Ross & Co, said

 ”the US government’s stimulus programmes have prevented the economy from going off the cliff. But was quick to add that the revival in the US economy will take time.He feels a V-shape recovery in the near-term is unlikely. “

 

Tan Teng Boo

 

“We are in the early stage of a bull market.”

IMF

 

“the economic outlook for the Asia and the Pacific region will take longer than other parts of the world to recover from the global slow-down”

Volume in KLCI has been surging but the index is directionless now. That’s why the index gain so little with such a huge volume.I think small investors are jumping into the market and big government funds are selling their shares now.

This situation may continue for quite a long time because the funds which are holding huge volume of shares can only sell a billion shares per day.

The big funds can’t sell them at once because the volume can’t be taken by small investors in a day. They need to do it slowly to avoid massive selling in the market which may spook small investors. If small investors turn their heads away,big funds will be unable to unload their shares.

I believe the funds still need a few weeks to unload their shares to retail investors.When all the shares have been unloaded into the market, the KLCI index will start to drop slowly but daily. This happens because small investors who are mainly speculators/traders/pigs , will wait for huge rally so they can sell their shares at a profit. But what if the huge rally does not come (the number of sellers > the number of buyers)?

Small investors will unload their shares to cut loss/margin call. Other small investors will panic and when all of them sells,massive selling will be induced.

This is how the big funds architect the ups and downs of the market. Small investors have to go back to work,save some money and come back to play again when the market is UP again.   

It’s an ongoing cycle which keep most of us working for the rest of our life.You can’t really go against big funds which have a team of professionals plus big capital.

These big funds don’t have to compete against each other because the number of PIGS to be slaughtered are enough to fill their hunger.They just have to coopoerate with each others to push up the market.It’s not an open/efficient market here in Malaysia when the whole market is monopolize by government controlled vehicles.

Do you think you can beat them in the game of investing?Well,think again.

READ MORE FROM THIS BLOG

Bursa Malaysia Is Too Expensive !

market valuation

 

According to various research house (international & local included), the current market has been overbought. Please click here for a copy of these reports.

 

Let’s look into the valuation of Bursa Malaysia. Earnings of Malaysian companies will moderate in 2009 but their share prices have been going up and up. This has caused the forward market P/E to breach 16x. In January 2009,the forward market P/E was around 13x. P/E of 16x is actually the average P/E for Bursa Malaysia for the past 9 years but with current economic crisis, the P/E should be below 16x. Frankly speaking,I will value the whole market at 12x only. 

 

The sharp rise in the share price is not supported by any good fundamentals. Most of the Malaysian companies have yet to show losses as their annual reports will be out around June 2009.But if you investigate into their quarterly reports,you’ll see that most Malaysian companies have shown sharp drop in their revenue & profit in Q4 2008 and Q1 2009. Hence,it’s matter of time for the bear to rule again.

 

So what cause the market to go up so fast? My group of friends (who are analysts) discussed & have several explanation for it.

 

a)  Political power which requested inflow of public funds,  trust  funds and ‘Foreign Direct Investment’ which is ’proceeds’ belonged to some politicians parked in overseas banks.

 

b)  Human Greed: Retail investors who are actually market followers (PIGs) have been ushered by mass media to jump into the market now. When retail investors start to trade actively and confidently, big funds mentioned above will quitely and slowly sell their holdings to retail investors who are mostly ‘Uncle and Aunties’. This has pushed the volume to 1-2 billion several times.

Big funds exchange their paper money (shares) with real money (invested by retail investors). This is a great way to ‘collect’ money from the public. Who needs ‘EPF’ and ‘PNB’ anyway?

 

c) Foreign funds who have fled from the West into Asia. Foreign funds know that the current economic crisis is still with U.S. Therefore,it’s better to park their cash in Asia which has large pool of surpluses.These funds will pull back anytime especially right now, when market valuation in the West start to become more attractive than Asia.

 

I advise my readers to take their profits now. Even Mr. Tan Teng Boo is smart enough to sell his funds’ holdings. What are you waiting for?

Latest disposal by Capital Dynamics

 

 

 

 

 

 

 

Two Sides of A Story

Reading analyst reports can be really frustrating.Different analysts have very different opinions.

But analyst reports are useful for us to gather data for research.It’s better to deduce from the data ourselves than listening blindly to analysts.

In addition,analysts are paid commission for recommending certain companies.

Hence,I’ve created a new blog to share analyst reports to my readers.

Please visit my new blog.

This is a bear-market rally !

The current rally in U.S is definitely a bear-market rally.Meanwhile,in Malaysia,it’s a political rally. Local funds (private / government) have been holding up KLCI since Dec 2008.Whether they are instructed to do so does not matter.

Comparatively,companies in Bursa Malaysia are much more expensive than companies in Singapore, Hong Kong and other countries in ASIA.It’s sad to say that the current rally will mark a starting point for further decline for stocks in Bursa Malaysia.

There are a few reasons for the continuition of decline in Bursa Malaysia

1) Malaysian stocks are relatively expensive. Foreign investors may wait at the sideline / go to Hong Kong & Singapore.

2) Political uncertainties from now until next election. Or maybe for the next 10 years as capable leader is not yet produced.

3) Weakening export. U.S & Europe are still in recession. 

4) Weak consumer sentiment and rising unemployment. This can be seen in retail sales and home sales. The government and media are trying very hard to cover it up. But you can actually see weakening sentiment with your naked eyes. 

5) Foreign investors are saying “Tak Nak” to Malaysia. Lack of transparency,corruption and small market hinder foreign investment. Big foreign funds may go to Vietnam (Low cost with 80 mil people), China & India (full potential growth story), Singapore & Hong Kong (investment friendly countries)

My advice is not to buy during this rally. It may looks ‘yummy’ but it’s just a mirage.Start to invest again when the bear starts to rule.

Who is Mr. Market?

Mr. Market is the character Benjamin Graham uses to explain illogical mindset of traders . The story goes something like this:

Imagine that you own 50% of a business, which you purchased for RM3,600 mil. Mr. Market approaches everyday to tell you what he thinks the business is worth based on latest news. And everyday, he offers to either buy your business for a price which he forms in his head, or, to sell you his share of the business for that price.

Each day, however, he quotes you a different price from the day before. Sometimes the price he quotes sounds about fair. Sometimes it’s high. Sometimes it’s low.

Let’s say the whole business is producing on average, RM 1,200 mil free cash flow with net profit of RM 600 mil. What is the value of the business to you?

By owning 50% of the business, you own RM 600 mil FCF and net profit of RM 300 mil per annum.You paid around RM 3,600 mil for this business a year ago. Hence, you bought this business for 6 times its FCF and 12 x earnings.Let’s say the nature of the business is stable and you anticipate the FCF and net profit will increase over time,you might not want to sell it unless Mr. Market offers you a ridiculously high price.

One day, Mr. Market offers you an additional 40%  extra of what you paid a year ago. He offers RM 5,040 mil to for your holdings.Most of us will let go after making 40% profit per annum.

But if you are a sensible businessperson,  you won’t let Mr. Market’s daily communication determine your view of the value of 50% interest in the business. He is a sweet talker and convince  you with various economic prediction,charts,information and etc to create doubt and fear in you. 

Most of us will be swayed by Mr Market ’s offer.

But as a sensible business owner, you may be happy to sell out to him when he quotes you a ridiculously high price, and equally happy to buy from him when his price is low. But the rest of the time you will be wiser to form your own ideas of the value of your holdings, based on full reports from the company about its operations and financial position.

Remember, fluctuations in the market price for a given business don’t really affect the fundamental value of that business. If you own a share in a company, the value of each share is a function of the business ’s profitability/cash flow/management/branding and not a related to the price quoted in Bursa M’sia.

So, as long you understand the business you’re buying,today’s market price is totally irrelevant.

Mah Sing Is A Good Buy

Mah Sing Group involves in construction, management, and development of residential, commercial, and industrial properties in Malaysia. The company also involves in the manufacture, assembly, and sale of a range of plastic molded products in Malaysia and Indonesia.

Around 80% of its revenue originates from property development and another 20% from its plastic division.Currently,Mah Sing is in net cash position.In times of turbulence,”Cash is King”.

By comparison to other property developers,its landbank is small.Moreover,it does not have revenue from property investment unlike Sunway and IGB.It does not have a REIT as well.

With current financial strength,Mah Sing is well positioned to:

1) Buy cheap lands in M’sia and other countries. Take note that Mah Sing has not venture overseas unlike SPSETIA,GAMUDA and GUOCOLAND

2) Eat up competitors to enhance landbank because good lands are limited

3)Increase J.V projects and benefit from current low construction cost

4)Capital repayment and buy back shares if Mah Sing does not have any future plan which I doubt

If you check its shareholders, Datuk Seri Leong owns around 40%,Capital Group 9.7% and Amanah Saham Bumiputra owns 14%.

What intrigue me was Amanah Saham Bumiputera has been accumulating Mah Sing ’s shares in an aggresive mode.Could there be insider news?

Based on current,Mah Sing will declare 5% (8sen) dividend in mid April upon closing its book for the year.This stock has little probability to fall to RM 1.25 level again due to high percentage of institutional owners which are actively investing in this company

 Risk of investing in Mah Sing:

1) Weakening property industry outlook

2)  Bad capital deployment strategy

Weighing its risk and reward,Mah Sing is a good buy at around RM 1.60